TORONTO (miningweekly.com) – Canadian base-metals producer Lundin Mining has shifted its focus to pursuing growth opportunities, and is “very actively” assessing acquisition opportunities, but will likely get the best bang for its buck from expanding existing assets, CEO Phil Wright said on Thursday.
Lundin owns the Zinkgruvan mine in Sweden, Neves-Corvo in Portugal and the smaller Aguablanca operation in Spain. It also owns a 24,75% in Freeport-McMoRan Copper & Gold's Tenke Fungurume copper/cobalt mine, in the Democratic Republic of Congo.
The company benefited from higher metals prices and increased production levels during the fourth quarter of 2009, and ended the year with net debt of $49,3-million and $141,6-million in cash on hand.
A year earlier, Lundin had a net debt position of $145,5-million, and was under pressure to negotiate a $575-million revolving line of credit facility, after it was not in compliance with the agreement at year-end.
“Looking where Lundin stands today, with Europe generally running well, and Tenke being well run, our focus has clearly switched back to growth,” Wright told analysts and investors on a conference call.
Zinc production at Neves-Corvo is expected to resume next year at a rate of 50 000 t/y.
However, Wright indicated that the company is assessing the potential to accelerate the timetable, given the current zinc prices.
“That certainly is something that I would not be surprised to see,” he commented.
Secondly, Lundin is targeting the first production in early 2013 from its Lombador zinc/copper discovery, at Neves-Corvo.
A feasibility study on the project is targeted for completion in the early 2011.
The firm is also preparing to start copper production from Zinkgruvan in the second quarter of this year, while studies are ongoing into the first phase of expansion at the large Tenke Fungurume operation, Wright continued.
Looking externally, the company is actively assessing opportunities to make acquisitions in base metals, he said.
“I have to say that I think there are very few decent opportunities out there at present,” he said.
The opportunities that do exist are generally being priced by the market in a way that seems to discount any risk associated with development, Wright commented.
“So we are going to continue to be very active in terms of looking, but I think that the best opportunities we have at the moment are the ones that we have internally.
“In copper, we are not going to find anything better than Tenke, and in zinc we are not going to find anything better than Lombador.”
Lundin expects base-metals prices to remain volatile going forward, but that solid demand will return at some point.
“And our house view is very much of the opinion that we are going to start to see some pretty significant supply shortages emerge once that comes back,” Wright said.
Earlier on Thursday, Lundin reported a fourth-quarter net income of $35,1-million compared with a $728,5-million loss a year earlier, when it recorded a big asset write-down related to lower metals prices.
Excluding impairments, Lundin posted net income from continuing operations of $72,2-million in the fourth quarter, compared with a $131,9-million loss in the same period of 2008.
The company, which exceeded its own production guidance in 2009, expects to produce 90 000 t of copper, 92 000 t of zinc, 40 000 t of lead and 7 500 t of nickel this year from its wholly-owned operations, plus an attributable 28 500 t of copper from Tenke Fungurume.
However, Wright pointed out that the forecasts do not take into account the effects of industrial action currently under way at Neves-Corvo, where some underground workers are holding two-hour strikes at the beginning of each shift, after demands for a 17% salary increase were rejected.
Fewer than 50% of the underground workers are involved and no surface workers are taking part, he said.
Wright said he could neither speculate how the action would affect production, nor how long it might continue.
“I am just not prepared to see a short-term compromise on an opportunistic action,” he said.
Shares in Lundin rose 1,14% on Thursday, to C$4,45 apiece by 16:10 in Toronto.
Edited by: Liezel Hill